Starting January 1, 2025, the Indonesian government increased the Value Added Tax (PPN) rate from 11% to 12%. However, the actual tax amount paid will remain the same because a special formula is applied to reduce the taxable base (DPP) for rental transactions.
PPN only applies if the property owner is a taxable business entity (PKP). If the landlord is an individual who is not a PKP, PPN does not apply to the rent.
PPh Final is a final income tax applied to rental income from property. Since it is a final tax, there are no additional returns or refunds after payment.
The tax rate is 10% of the total rental income. When the tenant is a corporation, the company must withhold the 10% tax from the rent and pay it directly to the Indonesian Tax Authority through the CoreTax system. The company then provides the landlord with a Bukti Potong (withholding certificate) as proof of payment.
When the rent is tax-inclusive:
Offered rent: USD 24,000
PPh Final (10%): USD 2,400
Amount received by owner: USD 21,600
When the rent is tax-exclusive:
Offered rent: USD 21,600
Total with tax: 21,600 ÷ 0.9 = USD 24,000
PPh Final (10%): USD 2,400
Amount received by owner: USD 21,600
If the property owner is an individual and the tenant is a corporation, the tenant will withhold 10% PPh Final and pay it through CoreTax. The landlord will receive the Bukti Potong from the tenant.
There is no PPN charged unless the landlord is registered as a taxable business (PKP). Rent quotations are often given as tax-exclusive amounts, but this can vary depending on the property, so it is important to confirm before signing the lease agreement.
If the property is owned by a corporation, the rent is subject to 12% PPN. The corporate owner typically pays the PPh Final (4-2) directly.
In some cases, the tax details are not clearly written in the contract, so tenants should review the lease carefully to confirm the tax structure.
For individual (non-PKP) owners, there is no PPN, and the tenant company withholds 10% PPh Final and pays it via CoreTax.
For corporate (PKP) owners, 12% PPN applies to the rent, and the corporate owner pays 10% PPh Final separately.
Who pays the taxes?
If the tenant is a company, it will withhold 10% PPh Final from the rent and pay it on behalf of the landlord.
Why is there no tax written on the invoice?
Because the PPh Final is already deducted from the rent amount. The tenant pays this tax directly to the tax authority, and the landlord receives the rent amount after tax deduction.
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